Question 1

A basic assumption of classical economics is:

Accepted Answer

A)  supply creates its own demand. 
B)  demand creates its own supply. 
C)  the level of output determines the levels of wages and prices. 
D)  the level of output shifts to bring wages into equality with prices. 
A)  supply creates its own demand. 
B)  demand creates its own supply. 
C)  the level of output determines the levels of wages and prices. 
D)  the level of output shifts to bring wages into equality with prices.

Question 2

According to the new classical approach, an increase in aggregate demand could lead to an increase in total output in:

Accepted Answer

A)  the short run and the long run. 
B)  the short run but not the long run. 
C)  the long run but not the short run. 
D)  neither the long run nor the short run. 
A)  the short run and the long run. 
B)  the short run but not the long run. 
C)  the long run but not the short run. 
D)  neither the long run nor the short run.

Question 3

Using the Keynesian approach, if leakages from the spending stream are greater than injections into the spending stream, total spending will be:

Accepted Answer

A)  less than total output, and total output will decrease. 
B)  less than total output, and total spending will increase. 
C)  greater than total output, and total output will increase. 
D)  greater than total output, and total spending will decrease. 
A)  less than total output, and total output will decrease. 
B)  less than total output, and total spending will increase. 
C)  greater than total output, and total output will increase. 
D)  greater than total output, and total spending will decrease.

Question 4

The classical school lost popularity due to its inability to explain or offer solutions for:

Accepted Answer

A)  stagflation. 
B)  the Great Depression. 
C)  rapid increases in prices. 
D)  the growth in power of large multinational corporations. 
A)  stagflation. 
B)  the Great Depression. 
C)  rapid increases in prices. 
D)  the growth in power of large multinational corporations.

Question 5

According to the new classical approach, an increase in aggregate demand in the long run would lead to an increase in:

Accepted Answer

A)  total output and the price level. 
B)  total output with no change in the price level. 
C)  the price level with no change in total output. 
D)  all of the above. 
A)  total output and the price level. 
B)  total output with no change in the price level. 
C)  the price level with no change in total output. 
D)  all of the above.

Question 6

What role do profit-maximizing efforts by businesses play in new Keynesian economics?

Accepted Answer

Businesses can maximize their profits bu

Question 7

-According to classical economics, if aggregate demand were at AD2 and prices and wages were at P1W1:

Accepted Answer

A)  prices and wages would eventually fall back to P2W2. 
B)  the aggregate demand curve AD2 would shift to the left. 
C)  the full employment level of output would shift to the left. 
D)  prices and wages would remain at P1W1 and the full employment level of output would remain where it was before the change in prices and wages. 
A)  prices and wages would eventually fall back to P2W2. 
B)  the aggregate demand curve AD2 would shift to the left. 
C)  the full employment level of output would shift to the left. 
D)  prices and wages would remain at P1W1 and the full employment level of output would remain where it was before the change in prices and wages.

Question 8

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy.
  
-The most appropriate name for the line running at a 45 degree angle through the graph would be the:

Accepted Answer

A)  total output line. 
B)  total spending line. 
C)  injections and leakages line. 
D)  spending equals output line. 
A)  total output line. 
B)  total spending line. 
C)  injections and leakages line. 
D)  spending equals output line.

Question 9

In the Keynesian model, when total spending in the economy is less than total production, business inventories:

Accepted Answer

A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  decrease at first and then remain unchanged. 
A)  increase. 
B)  decrease. 
C)  remain unchanged. 
D)  decrease at first and then remain unchanged.

Question 10

Using the Keynesian approach, if total spending in the economy were greater than the level of output, injections into the spending stream would be:

Accepted Answer

A)  less than leakages, and the level of output would increase. 
B)  less than leakages, and the level of output would decrease. 
C)  greater than leakages, and the level of output would increase. 
D)  greater than leakages, and the level of output would decrease. 
A)  less than leakages, and the level of output would increase. 
B)  less than leakages, and the level of output would decrease. 
C)  greater than leakages, and the level of output would increase. 
D)  greater than leakages, and the level of output would decrease.

Question 11

According to the new classical approach to aggregate demand:

Accepted Answer

A)  increases in interest rates cause people to buy more because they are getting better returns on their investments. 
B)  increases in the economy's general level of prices cause people to buy more foreign-produced goods and services. 
C)  increases in the economy's general level of prices cause the value of people's accumulated wealth to increase, which causes them to buy more. 
D)  all of the above. 
A)  increases in interest rates cause people to buy more because they are getting better returns on their investments. 
B)  increases in the economy's general level of prices cause people to buy more foreign-produced goods and services. 
C)  increases in the economy's general level of prices cause the value of people's accumulated wealth to increase, which causes them to buy more. 
D)  all of the above.

Question 12

In the new classical model, aggregate supply is upward sloping in the short run, and perfectly vertical at the natural rate of unemployment in the long run.

Accepted Answer

A) True 
 B)False

Question 13

The classical economists assumed that savings leakages from the spending stream:

Accepted Answer

A)  equal zero because people are too poor to save. 
B)  equal investment injections because of the operation of the interest rate. 
C)  exceed investment injections, which causes the level of economic activity to fall. 
D)  are less than investment injections because of business opportunities created by technological change. 
A)  equal zero because people are too poor to save. 
B)  equal investment injections because of the operation of the interest rate. 
C)  exceed investment injections, which causes the level of economic activity to fall. 
D)  are less than investment injections because of business opportunities created by technological change.

Question 14

Under the Keynesian system, government intervention in an economy would NOT be required:

Accepted Answer

A)  at any time. 
B)  when the economy is at full employment. 
C)  when the economy is operating above full employment. 
D)  when the economy is operating below full employment. 
A)  at any time. 
B)  when the economy is at full employment. 
C)  when the economy is operating above full employment. 
D)  when the economy is operating below full employment.

Question 15

In the Keynesian model, if leakages from the spending stream are greater than injections, total output will decrease.

Accepted Answer

A) True 
 B)False

Question 16

The Phillips curve that shows a tradeoff between the rate of unemployment and the rate of inflation is:

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  downward sloping at low rates of unemployment and upward sloping at high rates of unemployment. 
D)  upward sloping at low rates of unemployment and downward sloping at high rates of unemployment. 
A)  downward sloping. 
B)  upward sloping. 
C)  downward sloping at low rates of unemployment and upward sloping at high rates of unemployment. 
D)  upward sloping at low rates of unemployment and downward sloping at high rates of unemployment.

Question 17

Classical economics holds that a market economy will tend to operate at full employment when:

Accepted Answer

A)  exports are greater than imports. 
B)  it is free of government intervention. 
C)  the government runs deficit budgets. 
D)  the money supply grows at an increasing rate. 
A)  exports are greater than imports. 
B)  it is free of government intervention. 
C)  the government runs deficit budgets. 
D)  the money supply grows at an increasing rate.

Question 18

The theory that supply creates its own demand in the macroeconomy is:

Accepted Answer

A)  most closely associated with Keynesian economics. 
B)  the rule that was used to direct government spending to pull the U.S. economy out of the Great Depression. 
C)  an assumption that underlies the classical economic position that an economy automatically moves to full employment. 
D)  all of the above. 
A)  most closely associated with Keynesian economics. 
B)  the rule that was used to direct government spending to pull the U.S. economy out of the Great Depression. 
C)  an assumption that underlies the classical economic position that an economy automatically moves to full employment. 
D)  all of the above.

Question 19

After reading Application 9.2, "The Academic Scribblers,"one could conclude that individualism was important to:

Accepted Answer

A)  Adam Smith, J.M. Keynes, and Milton Friedman. 
B)  Milton Friedman and J. M. Keynes, but not to Adam Smith, who wrote two centuries earlier. 
C)  J. M. Keynes, but not to Adam Smith or Milton Friedman, both of whom favored free markets. 
D)  Adam Smith and Milton Friedman, but not to J. M. Keynes, who favored government intervention in all economic areas. 
A)  Adam Smith, J.M. Keynes, and Milton Friedman. 
B)  Milton Friedman and J. M. Keynes, but not to Adam Smith, who wrote two centuries earlier. 
C)  J. M. Keynes, but not to Adam Smith or Milton Friedman, both of whom favored free markets. 
D)  Adam Smith and Milton Friedman, but not to J. M. Keynes, who favored government intervention in all economic areas.

Question 20

Using the Keynesian approach, an economy with $9.0 trillion in total spending and $8.4 trillion in total output is operating where:

Accepted Answer

A)  injections exceed leakages by $600 billion. 
B)  leakages exceed injections by $600 billion. 
C)  injections plus leakages add up to $600 billion. 
D)  injections plus leakages add up to $17.4 trillion. 
A)  injections exceed leakages by $600 billion. 
B)  leakages exceed injections by $600 billion. 
C)  injections plus leakages add up to $600 billion. 
D)  injections plus leakages add up to $17.4 trillion.

A basic assumption of classical economics is:

According to the new classical approach, an increase in aggregate demand could lead to an increase in total output in:

Using the Keynesian approach, if leakages from the spending stream are greater than injections into the spending stream, total spending will be:

The classical school lost popularity due to its inability to explain or offer solutions for:

According to the new classical approach, an increase in aggregate demand in the long run would lead to an increase in:

What role do profit-maximizing efforts by businesses play in new Keynesian economics?

-According to classical economics, if aggregate demand were at AD₂ and prices and wages were at P₁W₁:

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -The most appropriate name for the line running at a 45 degree angle through the graph would be the:

In the Keynesian model, when total spending in the economy is less than total production, business inventories:

Using the Keynesian approach, if total spending in the economy were greater than the level of output, injections into the spending stream would be:

According to the new classical approach to aggregate demand:

In the new classical model, aggregate supply is upward sloping in the short run, and perfectly vertical at the natural rate of unemployment in the long run.

The classical economists assumed that savings leakages from the spending stream:

Under the Keynesian system, government intervention in an economy would NOT be required:

In the Keynesian model, if leakages from the spending stream are greater than injections, total output will decrease.

The Phillips curve that shows a tradeoff between the rate of unemployment and the rate of inflation is:

Classical economics holds that a market economy will tend to operate at full employment when:

The theory that supply creates its own demand in the macroeconomy is:

After reading Application 9.2, "The Academic Scribblers,"one could conclude that individualism was important to:

Using the Keynesian approach, an economy with $9.0 trillion in total spending and $8.4 trillion in total output is operating where:

Introduction to Economics

Economic Decision Making and Economic Systems

Demand, Supply, and the Determination of Price

Goals and Problems of the Macroeconomy: Employment, Prices and Production

Foundations of the Macroeconomy

The Role of Government in the Macroeconomy

Money, Financial Institutions, and the Federal Reserve

Money Creation, Monetary Theory, and Monetary Policy

Households and Businesses: An Overview

Benefits, Costs, and Maximization

Production and the Costs of Production

Competition and Market Structures

Government and the Markets

Labor Markets, Unions, and the Distribution of Income-A

International Trade

International Finance

Filters

Exam 9: Macroeconomic Viewpoints and Models

A basic assumption of classical economics is:

According to the new classical approach, an increase in aggregate demand could lead to an increase in total output in:

Using the Keynesian approach, if leakages from the spending stream are greater than injections into the spending stream, total spending will be:

The classical school lost popularity due to its inability to explain or offer solutions for:

According to the new classical approach, an increase in aggregate demand in the long run would lead to an increase in:

What role do profit-maximizing efforts by businesses play in new Keynesian economics?

-According to classical economics, if aggregate demand were at AD2 and prices and wages were at P1W1:

The following figure illustrates the Keynesian model of equilibrium in the macroeconomy. -The most appropriate name for the line running at a 45 degree angle through the graph would be the:

In the Keynesian model, when total spending in the economy is less than total production, business inventories:

Using the Keynesian approach, if total spending in the economy were greater than the level of output, injections into the spending stream would be:

According to the new classical approach to aggregate demand:

In the new classical model, aggregate supply is upward sloping in the short run, and perfectly vertical at the natural rate of unemployment in the long run.

The classical economists assumed that savings leakages from the spending stream:

Under the Keynesian system, government intervention in an economy would NOT be required:

In the Keynesian model, if leakages from the spending stream are greater than injections, total output will decrease.

The Phillips curve that shows a tradeoff between the rate of unemployment and the rate of inflation is:

Classical economics holds that a market economy will tend to operate at full employment when:

The theory that supply creates its own demand in the macroeconomy is:

After reading Application 9.2, "The Academic Scribblers,"one could conclude that individualism was important to:

Using the Keynesian approach, an economy with $9.0 trillion in total spending and $8.4 trillion in total output is operating where:

Introduction to Economics

Economic Decision Making and Economic Systems

Demand, Supply, and the Determination of Price

Goals and Problems of the Macroeconomy: Employment, Prices and Production

Foundations of the Macroeconomy

The Role of Government in the Macroeconomy

Money, Financial Institutions, and the Federal Reserve

Money Creation, Monetary Theory, and Monetary Policy

Households and Businesses: An Overview

Benefits, Costs, and Maximization

Production and the Costs of Production

Competition and Market Structures

Government and the Markets

Labor Markets, Unions, and the Distribution of Income-A

International Trade

International Finance

Filters

-According to classical economics, if aggregate demand were at AD₂ and prices and wages were at P₁W₁: